Connecticut General Statutes
Chapter 420 - Health Clubs
Section 21a-226. - Connecticut Health Club Guaranty Fund.

(a) The Commissioner of Consumer Protection shall establish and maintain the Connecticut Health Club Guaranty Fund in accordance with the provisions of this section.

(b) Any health club which receives a license pursuant to section 21a-223 shall pay a fee of five hundred dollars annually to the guaranty fund except that a health club operated primarily for the purpose of teaching particular forms of self-defense or martial arts that has annual gross revenues of less than one hundred thousand dollars shall pay one hundred dollars annually to the guaranty fund.
(c) Payments received under subsection (b) of this section shall be credited to the guaranty fund whenever the fund balance is less than three hundred fifty thousand dollars. Money in the fund may be invested or reinvested in the same manner as funds of the state employees retirement system, and the interest derived from such investments shall be credited to the guaranty fund whenever the fund balance is less than three hundred fifty thousand dollars. Any such payments or interest not deposited in the guaranty fund shall be credited to the General Fund.
(d) If a health club is no longer in operation at the location where the buyer entered into the contract, the buyer having a claim against said health club may apply to the commissioner for payment of such claim from the guaranty fund, if the claim arises from (1) failure to provide services, (2) failure to comply with its contract obligations, (3) failure to remain open for the duration of its contracts, or (4) failure to comply with any provision of this chapter. Such claim may be filed if the health club fails to make payment of such claim.
(e) The commissioner shall provide forms for applications by buyers for payment from the guaranty fund. The application shall include the name and address of the health club, the beginning and ending date of the contract, the price of the contract, the date of the closing of the health club, the amount and the basis of the claim and a copy of the contract or other proof of membership deemed suitable by the commissioner. No application for a payment from the guaranty fund shall be accepted by the commissioner more than six months after the date of the closing of the location of the health club where the buyer entered into the contract.
(f) The commissioner shall proceed upon such application and shall hold a hearing in accordance with the provisions of chapter 54. Notwithstanding the provisions of chapter 54, the decision of the commissioner shall be final with respect to the application. The commissioner may hear applications of all buyers submitting claims against a single health club in one proceeding.
(g) After hearing, the commissioner shall issue an order requiring payment from the guaranty fund of any sum he finds to be payable upon such application. The total compensation payable from the guaranty fund on the closing of any one health club location shall not exceed seventy-five thousand dollars.
(h) If the commissioner pays any amount as a result of a claim against a health club pursuant to an order under subsection (g) of this section, the health club shall not be eligible to receive a new or renewed license until it has repaid such amount in full, plus interest at a rate to be determined by the commissioner.
(i) If the commissioner pays any amount as a result of a claim against a health club pursuant to an order under subsection (g) of this section, the commissioner shall determine if the health club is possessed of real or personal property or other assets, liable to be sold or applied in satisfaction of the claim on such fund. If the commissioner discovers any such assets, he may request that the Attorney General take any action necessary for the realization thereof for the reimbursement of the guaranty fund.
(j) The commissioner may, in order to preserve the integrity of the guaranty fund, order payments to be made out of said fund for amounts less than the actual loss incurred by any buyer of a health club contract.
(k) When the commissioner has caused any sum to be paid from the guaranty fund to a buyer who has entered into a health club contract, the commissioner shall be subrogated to all of the rights of the buyer up to the amount paid, and the buyer shall assign all of his right, title, and interest in the claim up to such amount to the commissioner, and any amount and interest recovered by the commissioner on the claim shall be deposited to the guaranty fund, except as provided in subsection (c) of this section.
(l) Notwithstanding any provision of the general statutes to the contrary, the commissioner may prohibit a health club from making payments to the Connecticut Health Club Guaranty Fund if, in the opinion of the commissioner, the health club within the past five years has engaged in any unfair or deceptive trade practices under subsection (a) of section 42-110b, has engaged in any conduct of a character likely to mislead, deceive or defraud the buyer, the public or the commissioner, or has violated any of the provisions this chapter. If the commissioner determines that a health club should be prohibited from making payments to the Connecticut Health Club Guaranty Fund the department shall mail a notice by certified mail to the principal place of business of the health club and shall state the grounds for the contemplated action. Within fourteen days of receipt of the notice, the health club may file a written request for a hearing. If a hearing is requested such hearing shall be conducted in accordance with the provisions of chapter 54.
(m) Each health club which has been prohibited from making payments to the Connecticut Health Club Guaranty Fund shall furnish the commissioner with a guaranty bond satisfactory to the commissioner in a sum equal to one hundred twenty-five thousand dollars and shall obtain a certificate from the department that the requirements of this subsection have been met. If a health club is no longer in operation at the location where the buyer entered into the contract, the buyer having a claim against the health club may apply to the commissioner for payment of such claim from the guaranty bond, if the claim arises from (1) failure to provide services, (2) failure to comply with its contract obligations, (3) failure to remain open for the duration of its contracts, or (4) failure to comply with any provision of this chapter. Such claim may be filed if, within thirty days after the buyer gives notice of the claim to the health club, the health club fails to make payment of such claim.
(n) The commissioner may adopt regulations in accordance with chapter 54 to carry out the purposes of this section.
(P.A. 84-531, S. 8; P.A. 88-179, S. 1–3; P.A. 90-96, S. 1; P.A. 95-135, S. 1; 95-219; P.A. 02-82, S. 4; June 30 Sp. Sess. P.A. 03-6, S. 146(c); P.A. 04-189, S. 1.)
History: P.A. 88-179 amended Subsec. (b) to increase fee from $300 to $500 and amended Subsec. (j) to provide for less than full payments from the fund in order to preserve its integrity if the commissioner determines that that is necessary; P.A. 90-96 made technical changes to Subsec. (c), increased the total compensation payable from the guaranty fund from $50,000 to $75,000 in Subsec. (g) and added new Subsecs. (l) and (m) re commissioner's power to prohibit health clubs from making payments to guaranty fund and re submission of guaranty bonds, relettering former Subsec. (l) as (n); P.A. 95-135 amended Subsec. (d) to delete thirty-day waiting period to file claim; P.A. 95-219 amended Subsec. (b) to reduce fee to $100 annually for certain health clubs operated primarily for teaching self-defense or martial arts; P.A. 02-82 amended Subsec. (e) to allow other proof of health club membership deemed suitable by commissioner to be included with application by buyer for payment from guaranty fund; June 30 Sp. Sess. P.A. 03-6 replaced Commissioner of Consumer Protection with Commissioner of Agriculture and Consumer Protection, effective July 1, 2004; P.A. 04-189 repealed Sec. 146 of June 30 Sp. Sess. P.A. 03-6, thereby reversing the merger of the Departments of Agriculture and Consumer Protection, effective June 1, 2004.